The NDRC attributed the progress to the government’s continued efforts in reducing production output, eliminating outdated capacity and promoting mergers, reorganisation, and industry upgrades.

Helping to explain the price surge, the report stated that the subsequent decline in coal stocks “resulted in a narrowed decline for major coal business profits, reaching 3.5 billion yuan ($US525 million) in the first five months of 2016, down 73.2 % year-on-year, compared with a 92.5% drop in the first quarter”.

While the decline in output helped to underpin an improvement in profitability, the report also acknowledged that Chinese coal consumption fell to 1.82 billion tonnes in the first half of 2016, down 5.1% on the same period a year earlier.

Mirroring the bullish sentiment expressed in coking coal futures, albeit to a lesser degree, Chinese iron ore and rebar futures also jumped on Monday, closing with gains of 3.39% and 4.07% respectively.

The October 2016 rebar future on the Shanghai Futures Exchange closed at 2,607 yuan, the highest level seen since April 25. Separately, the September 2016 iron ore future on the Dalian Commodities Exchange finished the session at 503 yuan, again the highest level seen since late April.

As the China.org article pointed out, “the Chinese government made reducing excess capacity a top priority in late 2015 at the Central Economic Work Conference and put it at the center of the 13th Five-Year-Plan”.

“China plans to cut steel and coal capacity by about 10 percent — as much as 150 million tonnes of steel and half a billion tonnes of coal — in the next few years, with funds set aside to help displaced workers,” it wrote.

Still, the news that these curtailments are occurring has seen speculative forces in Chinese commodity futures — thought near-extinct after a purge in May this year — come roaring back to the fore.

However, at this point, all of the attention seems to be on the impact lower output levels will have on prices, with scant regard being paid to the reason why they’re being shuttered in the first place — weakening Chinese demand.

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